The Supreme Cannabis Company (TSX: FIRE) filed its first quarter 2020 financials after the bell tonight, indicating the firm generated net revenues of $11.4 million during the three months ended September 30, 2019. On a quarter over quarter basis revenues were down 39.8% for the firm. The firm also concurrently announced a $90 million secured credit facility,
Supreme highlighted previously announced mechanical failures in grow rooms 1, 2 and 3 as the reason for the decreased revenue, combined with weakening wholesale markets. Wholesale sales accounted for 57% of sales during the quarter, compared to 65% in the prior quarter.
Total gross margin for the period amounted to $7.0 million before biological adjustments were taken into account. Total expenses during the quarter came to $18.4 million, with wages and benefits accounts for $4.9 million. Share based compensation was the second largest expense at $4.4 million, followed by sales and marketing at $2.0 million. Net loss for the period came in at $16.52 million.
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In terms of cash flow, operating cash flow came in at ($7.6 million) while investing activities, including construction costs ccounted for negative cash flow of ($17.5 million). The exercise of certain warrants and stock options partially offset negative cash flow during the quarter, with total financial cash flow being $6.7 million. Total cash decreased from $54.8 million to $36.4 million during the quarter.
Looking towards the balance sheet, a rare event in the cannabis sector was observed with Supreme Cannabis’ receivables, which actually decreased in the quarter from $21.9 million to $12.6 million. While still being larger than current net revenues, its a marked improvement from the previous quarter. Inventory climbed by several million during the quarter however, to $27.5 million from $19.0 million.
Current liabilities decreased slightly during the quarter, from $30.6 million to $26.2 million. All other current items changed only marginally, leaving Supreme Cannabis with a working capital of $62.3 million, down from last quarters figure of $76.8 million.
In terms of cannabis, 5,778 kilograms of product were harvested during the quarter. Supreme Cannabis has yet to file a corresponding news release for this quarters financials, making it unclear how much product was sold during the three month period.
With respect to the credit facility, Supreme has entered a credit agreement for $90 million with the Bank of Montreal and a group of lenders. The financing consists of of a $70.0 million term loan, and a revolving $20.0 million credit facility. The credit facility is secured by the assets of Supreme Cannabis, including 7Acres. The borrow rate is anticipated to be between 5-6% per annum. Supreme has drawn $55 million from the term loan as of the time of filing.
Supreme Cannabis last traded at $0.75 on the TSX.
Information for this analysis was found via Sedar, and Supreme Cannabis. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
